Penang Economic and Development Report 2017/2018 22

Penang’s Macroeconomic 22 Performance

2.1 Output performance down from 8.7% in 2016 to 6.2% in 2017, it still exceeded the national average (1%) (Figure 2.2). The Penang’s economy has been growing at an average manufacturing and services sectors have been the rate of 5.6% over the past seven years (Figure main contributors to Penang’s GDP over the past 2.1). The state’s GDP growth slowed down by 0.3 seven years. In fact, Penang’s economic structure percentage point to 5.3% in 2017, mainly due to is mainly manufacturing- and services-oriented. In the negative 10.1% growth rate in the construction 2017, the services sector accounted for 49.3% of sector. Agricultural and manufacturing sectors GDP, while 44.8% was from the manufacturing sector registered the higher growth rates at 2.2% and 5.7%, (Table 2.1). However, the agricultural (2%), mining respectively, in 2017 compared to 2016, while the and quarrying (0.1%), and construction (2.6%) services sector remained at 5.6%. Although growth sectors were less significant, altogether accounting in Penang’s mining and quarrying sector had slowed for only 4.7% of Penang’s GDP.

Figure 2.1 GDP growth in Malaysia and Penang, 2011–17 (at constant 2010 prices)

9.0 8.0 8.0

7.0 6.0 5.9 6.0 5.4 5.6 5.5 5.4 5.3 5.3 5.1 5.0 5.0 4.5 4.7 4.2 4.0

Percentage 3.0

2.0

1.0

0.0 2011 2012 2013 2014 2015 2016 2017 Malaysia Penang

Source: Department of Statistics, Malaysia.

Figure 2.2 GDP growth rate by sector in Penang, 2016–17 (at constant 2010 prices)

Source: Department of Statistics, Malaysia. 23 Penang Economic and Development Report 2017/2018

Table 2.1 Percentage share of economic activity to Penang’s GDP, 2010–17 (at constant 2010 prices) Economic activity 2010 2011 2012 2013 2014 2015 2016 2017 Agriculture 2.4 2.4 2.4 2.4 2.3 2.2 2.0 2.0 Mining and quarrying 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 Manufacturing 45.9 45.2 43.9 43.5 44.1 44.7 44.6 44.8 Construction 2.8 2.8 3.3 3.1 3.2 3.0 3.1 2.6 Services 48.3 48.9 49.6 50.2 49.5 49.1 49.2 49.3

Note: Total may not add up due to rounding and exclusion of import duties component. Source: Department of Statistics, Malaysia.

In 2017, Penang contributed 12.9% to the country’s and poverty reduction through linkages with the manufacturing revenue of RM269.8 billion, second manufacturing sector and connecting the poor along after Selangor (29.4%). The sector is dominated the agri-supply chain. The share of the agriculture by E&E products. Penang’s manufacturing sector sector in Penang’s GDP dropped from 2.4% in 2010 recorded better growth in 2017 compared to 2016, to 2.0% in 2017. This was associated with a decrease which could be partly due to a huge increase in in overall agricultural land use. approved manufacturing investments from RM4.3 billion in 2016 to RM10.8 billion in 2017, as well The mining and quarrying sector’s share in Penang’s as the improved global economy. Meanwhile, the GDP constituted less than 1% in 2017; this has services sector held steady at 5.6%, driven mainly not changed significantly since 2010. Similarly, by the wholesale and retail trade, food and beverage the contribution of the construction industry to and accommodation; utilities, transportation and Penang’s GDP has been almost consistently low. storage; and information and communication This sector recorded a significant decrease of 10.1% sub-sectors. Over the years, the services sector in 2017, mainly due to the contraction in residential, has experienced slight growth as a proportion of non-residential, and special trade activities. state output, while the manufacturing sector has had a slight gradual decline. Indeed, the services Penang’s GDP per capita registered a growth rate sector has overtaken manufacturing’s slow growth, of 5.3% in 2017, reaching RM49,873 compared indicating the growth of shared services and to RM47,345 in 2016. This suggests the strong outsourcing (SSO) activities in Penang. likelihood of more goods and services that are available to consumers – and that consumers are in Considering Penang’s highly industrialised nature a better position to buy them, as the GDP per capita and limited land size, the agriculture sector is the most widely used measure of standard of contributes very little to Penang’s GDP. However, living. Penang was ranked third in GDP per capita in this sector plays an important role in overall growth 2017, after Kuala Lumpur and Labuan (Figure 2.3).

Figure 2.3 GDP per capita and GDP growth rate by state, 2016–17 (current prices)

W.P. Kuala Lumpur 9.6% W.P. Labuan 6.6% Pulau Pinang 5.3% Sarawak 11.2% Selangor 7.7% Melaka 11.2% Negeri Sembilan 8.0% 2017 Pahang 9.6% 2016 Johor 7.4% Terengganu 7.6% Perak 7.1% Sabah 13.7% Perlis 4.0% Kedah 6.1% Kelantan 6.1% 0 20,000 40,000 60,000 80,000 100,000 120,000 RM

Source: Authors’ own calculations; data from Department of Statistics, Malaysia. Penang Economic and Development Report 2017/2018 24

Being an open economy and a main hub for exports, and sound recording and reproducing apparatus; Penang’s economy is positively affected by the electrical machinery, apparatus, and appliances; improvements in the global and domestic economies. and road vehicles. This reveals that Penang’s Furthermore, the elimination of the GST in June 2018 external trade is still highly driven by the E&E and the reintroduction of the SST in September 2018 industry, which is a leading industry in Penang’s are expected to create more disposable income manufacturing sector. In fact, this industry has which, in turn, may boost consumer spending and benefited from growing global demand in the usage business activities. Going forward, Penang’s GDP of mobile devices (smartphones, tablets), storage growth is expected to remain favourable. devices (cloud computing, data centres, personal data drives), optoelectronics (photonics, fibre 2.2 External trade performance optics, light-emitting diodes (LEDs)) and embedded technology (integrated circuits, printed circuit Penang’s total volume of external trade had boards, LEDs). dramatically increased by 19.5% in 2017, mainly driven by improved global demand and robust For the first two months of 2018, Penang’s trade domestic activities. As presented in Figure 2.4, registered an additional surplus of about RM9 billion Penang’s exports, imports, and trade surpluses had over the same period in 2017, with export and import increased by 20.7%, 18.2%, and 36.3%, respectively, in growths of 32.5% and 5.2%, respectively. Machinery 2017 compared to 2016. The increase was the result and transport equipment remained the largest of positive growth in all major import and export exported (71.9%) and imported (66.3%) commodity commodities, with miscellaneous transactions in the first two months of 2018. and commodities recording the highest export and import growth rates of 158.9% and 35.4%, The North Butterworth Cargo Terminal and Bayan respectively (Table 2.2). The trade surplus increased Lepas air cargo are two important gateways for dramatically by about 50% in the final five months trade in Malaysia. In 2017, the North Butterworth of 2017 compared to January–July 2017. It also Cargo Terminal recorded the third-highest trade registered an additional surplus of about RM7.5 value among the major seaports in Malaysia, after billion over the same period in 2016. This was mainly Port Klang and Pasir Gudang in Johor. The export attributed to the growth in export value as a result of and import values gathered at this port were a stronger Ringgit. approximately RM50.7 billion and RM39.6 billion, respectively, an increase of 12.7% and 21.3% in 2017 In 2017, machinery and transport equipment compared to 2016. In the first four months of 2018, accounted for a significant share of Penang’s the port’s exports value dropped by 0.2%, while total gross exports and imports at 69% and 65.4%, the value of its imports grew by 1.5% compared to respectively. These include general industrial the same period in 2017. The Bayan Lepas airport machinery and equipment; office machines and is ranked number one among all air cargos in automatic data processing; telecommunications Malaysia by trade value. Its exports and imports

Figure 2.4 Monthly export, import, and balance of trade, Penang, January 2016–February 2018

30,000 9,000 8,000 25,000 7,000 20,000 6,000 n n 5,000 15,000 4,000

RM millio 10,000 3,000 RM millio 2,000 5,000 1,000 0 0 t t r r r r y v y v c c b g b g b Jul Jul Oc Oc Ap Ap Fe Fe Fe Jan Jan Jan Jun Jun Sep Sep De De Au Au Ma No Ma No Ma Ma 2016 2017 2018 Export Import BoT

Source: Department of Statistics, Malaysia. 25 Penang Economic and Development Report 2017/2018

Table 2.2 External trade, Penang, 2016–17 2016 2017 External trade RM million % Change RM million % Change Gross exports 193,444 2.1 233,493 20.7

Machinery and transport equipment 137,468 0.3 161,453 17.4 Miscellaneous manufactured articles 32,976 6.3 42,400 28.6 Chemicals 7,382 14.3 9,036 22.4 Manufactured goods 7,880 -0.8 8,702 10.4 Crude materials, inedible 2,675 7.9 4,411 64.9 Miscellaneous transactions and commodities 1,265 58.4 3,277 158.9 Gross imports 166,250 6.3 196,427 18.2

Machinery and transport equipment 109,321 8.1 128,473 17.5 Manufactured goods 12,029 3.7 13,319 10.7 Miscellaneous manufactured articles 12,065 11.2 13,224 9.6 Chemicals 9,734 9.4 11,526 18.4 Miscellaneous transactions and commodities 7,144 1.5 9,669 35.4 Food 7,052 2.8 7,449 5.6 Total trade 359,694 4.0 429,920 19.5 Trade balance 27,194 -17.7 37,065 36.3

Source: Department of Statistics, Malaysia.

values amounted to RM17.7 billion and RM14 billion 2.3 Prices in 2017, respectively, for an increase of 23.8% and 17.7% compared to the year before. In the first four The overall inflation rate3 in Penang stood at 4% in months of 2018, the value of its exports increased 2017 (1.5% higher than the preceding year), most dramatically by 40.3%, while its imports value likely due to the higher retail fuel prices. Higher price decreased by 2.4% compared to the same period in hikes were seen in transport (13.7%) and education 2017. (5%) groups, contributing 1.58 percentage points to the Consumer Price Index (CPI) increase in In line with the increase in global trade activities, 2017 (Table 2.3). Yet, the communications group strong domestic investment, and Penang serving experienced lower prices at 0.3% in 2017. Inflation as the main electronics hub for Southeast Asia, in the food and non-alcoholic beverages group rose Penang’s external trade position is expected to at a slower pace of 4.4% compared to 4.9% in 2016, remain resilient. This is supported by significant contributing 1.25 percentage points. In fact, the growth in the global manufacturing sector, with a CPI reflects the patterns in consumer expenditure4; 12.4% increase in the world semiconductor market Penang households are spending more of their in 2018 compared to 2017, as forecast by the World income on transport, education, and food and non- Semiconductor Trade Statistics (WSTS), as well alcoholic beverage, while a lower share of income is as higher crude oil prices. Furthermore, a healthy being spent on communications. trade balance is expected for 2018 as a result of the Ringgit appreciating against many major currencies, which may lead to lower import costs and higher export prices.

3 The inflation rate is measured by the annual changes in the CPI. 4 The weights used in the calculation of the CPI are based on the pattern of expenditure obtained from the Household Expenditure Survey conducted in 2016. Penang Economic and Development Report 2017/2018 26

Table 2.3 Changes in CPI, Penang 2016–17 (2010=100) Contribution to CPI Changes (%) growth Weights (percentage points) 2016 2017 2016 2017 Total 100.0 2.5 4.0 2.5 4.0 Food and non-alcoholic beverages 28.4 4.9 4.4 1.39 1.25 Alcoholic beverages and tobacco 2.3 16.2 0.7 0.37 0.02 Clothing and footwear 3.0 0.0 0.4 0.00 0.01 Housing, water, electricity, gas, and other fuels 29.2 2.8 2.4 0.82 0.70 Furnishings, household equipment, and 3.3 3.3 3.0 0.11 0.10 routine household maintenance Health 1.8 4.4 4.1 0.08 0.07 Transport 11.0 -5.5 13.7 -0.60 1.50 Communication 4.6 -2.1 -0.3 -0.10 -0.01 Recreation services and culture 5.2 1.5 1.8 0.08 0.10 Education 1.7 2.8 5.0 0.05 0.08 Restaurants and hotels 2.8 3.7 2.5 0.10 0.07 Miscellaneous goods and services 6.7 3.4 2.6 0.23 0.18

Source: Authors’ own calculations; data from Department of Statistics, Malaysia.

Figure 2.5 Year-on-year percentage of change in the CPI in Penang, January 2017–March 2018

Source: Department of Statistics, Malaysia.

The CPI for the first quarter of 2018 increased by Island’s over the past five years. However, Penang an average rate of 1.8% compared to 4.2% for the Island has had higher HPI for high-rise properties same period in 2017 due to the sharp decrease in than Seberang Perai. cost of transport. Prices of food and non-alcoholic beverages also slowed down to 3.3% in Q1 2018 The imposition of the zero-rated GST in June 2018 from 4.3% in Q1 2017 (Figure 2.5). is estimated to have a positive effect on prices, especially food and beverage, retail, and property Penang’s House Price Index (HPI) grew at 5.2% to prices since savings can come from input costs, 190.1 points in 2017, up from 180.7 points in 2016. leading to an increase in consumer expenditure. This rise was mostly driven by the Detached House In addition, reintroducing the SST will benefit Price Index (DHPI) (7.2%) and Terraced House consumers, as the SST will result in lower prices Price Index (THPI) (6.4%) (Figure 2.6). It shows the of goods in general. Yet, there might be a potential popularity of landed homes among buyers. Notably, increase in the prices of certain items such as the THPI in Seberang Perai outpaced Penang automobiles or charges for services rendered. 27 Penang Economic and Development Report 2017/2018

Figure 2.6 House Price Index by types of residential property in Penang, 2016–17

250 8.0 7.2% 7.0 200 6.4% 5.8% 6.0 5.2% 5.0

150 a g e 4.0 100 3.4%

3.0 Percent

House Price Index 2.0 50 1.0 0 0.0 All types Terrace High-rise Detached Semi-detached

2016 2017 % Change

Source: National Property Information Centre (NAPIC).

2.4 Household income and states at a growth rate of 10.1% (Table 2.4). expenditure In Penang, urban households earned RM1,112 more The median monthly household income for the than rural households, or RM5,477 and RM4,365, people of Penang improved by 7% biannually to respectively, with annual growth rates of 6.7% and RM5,409 in 2016 from RM4,702 two years ago. It 9.7%. Among the ethnic groups, Chinese households was the highest monthly household income in the had the largest income at RM6,401 with an annual northern region of Malaysia. While Penang’s median increase of 9.4% in 2016, followed by Malay monthly household income was lower than Johor households (RM4,874; 7.5%) and Indian households and Malacca, its median per capita household (RM4,751; 4.4%). income fared well above households in these two

Table 2.4 Median monthly household income by state and gender, 2014 and 2016

Median monthly 2016 household States Compounded Median Difference income (RM) annual per capita between Male (RM) Female (RM) growth household male-female 2014 2016 rate (%) income (RM) (RM) MALAYSIA 4,585 5,228 6.6 1,443 5,455 4,145 1,310 Johor 5,197 5,652 4.2 1,564 5,824 4,376 1,448 Kedah 3,451 3,811 5.0 1,055 3,955 2,758 1,197 Kelantan 2,716 3,079 6.3 796 3,191 2,571 620 Malacca 5,029 5,588 5.3 1,555 5,873 4,142 1,732 Negeri Sembilan 4,128 4,579 5.2 1,357 4,812 3,512 1,300 Pahang 3,389 3,979 8.0 1,128 4,040 3,612 428 Penang 4,702 5,409 7.0 1,595 5,767 4,111 1,655 Perak 3,451 4,006 7.5 1,228 4,194 3,172 1,022 Perlis 3,500 4,204 9.2 1,103 4,304 3,254 1,050 Selangor 6,214 7,225 7.5 1,960 7,421 6,231 1,191 Terengganu 3,777 4,694 10.9 1,105 4,782 4,006 776 Sabah 3,745 4,110 4.7 946 4,144 3,463 681 Sarawak 3,778 4,163 4.9 1,132 4,344 3,381 962 W.P. Kuala Lumpur 7,620 9,073 8.7 2,654 9,367 7,640 1,726 W.P. Labuan 5,684 5,928 2.1 1,370 6,005 5,496 509 W.P. Putrajaya 7,512 8,275 4.8 2,339 8,706 5,232 3,474

Source: Household Income Survey 2016, Department of Statistics, Malaysia. Penang Economic and Development Report 2017/2018 28

Male head of households had higher incomes than Batu Kawan Industrial Park and mixed development their female cohorts in all states. For the head of in the vicinity of Batu Kawan are fully operational. household in Penang, males earned RM1,655 more This will then stimulate income levels in Seberang than females; males received a median monthly Perai Selatan. household income of RM5,767 in 2016. Penang’s median monthly household expenditure According to the administrative districts, on the other hand increased by 4.8% per year from households from Penang Island were earning 2014–16. Household expenditure grew slower than more than those in mainland Penang. Nearly half more developed states – Kuala Lumpur (5.4%), of Penang Island households earned RM6,000 Selangor (6.4%), and Johor (5.1%) – as well as some and above per month while more than two-thirds less developed states – Perlis (13.3%), Terengganu of households in Seberang Perai Selatan did not (11.4%), and Perak (8.7%) (See Box 2.1). make more than RM6,000 a month – the highest proportion of households whose earnings are at the Figure 2.7 suggests that the implementation of lower tier (Figure 2.7). However, household income the GST on 1 April 2015 had a profound effect on is forecasted to rise in the light of a number of household expenses in less-developed states. This development projects such as the IKEA shopping might have raised the cost of living and lowered complex, which is scheduled to open by early 2019. purchasing power, particularly for the lower income groups. With the election of the new government, the Interestingly, the size of Penang Island households aggregate household consumption is expected to is smaller than in mainland Penang. In particular, increase in 2018 due to the zero-rated GST, allowing households in Timur Laut made up the highest for greater consumption of goods and services. income in the whole of Penang while having the smallest household size of 3.6 persons, followed Similar to the national expenditure, Penang’s closely by households in Barat Daya (3.9 persons). households on average spent the largest proportion As the family size gets larger, the median monthly of total expenditure on housing, water, electricity, household income shrinks. This is evident in and gas (RM1,232), constituting nearly 30% of total Seberang Perai Utara where households earned expenses. This is followed by food and beverages the lowest median income of RM4,753 a month in a (15.9%: RM667.78). Interestingly, spending in family of 4.6 persons. this category is proportionately lower than many neighbouring states such as Kelantan (26.9%: Penang Island comprises of high-tech manufacturing RM774.46), Perlis (24.1%: RM744.45), and Kedah and business services while mainland Penang (22.9%: RM699.98). While Penang is a highly prioritises light and heavy industries along with industrialised state, expenditure on food is still low. some agricultural, fishery, and quarrying activities. This suggests that food in Penang is still relatively This imbalance of income distribution between the cheaper than many less industrialised states, island and the mainland is expected to change when holding all else constant.

Figure 2.7 Percentage of households by monthly household gross income class and administrative district in Penang, 2016

100.0 9.6 9.3 8.0 90.0 13.1 17.1 16.4 d 80.0 27.1 25.0 30.7 32.5 70.0 32.4 31.8 60.0 50.0 40.0 30.0 63.6 67.0 56.1 57.9 50.5 51.8 20.0 % of total househol 10.0 0.0 Pulau Pinang Seberang Seberang Seberang Timur Laut Barat Daya Perai Tengah Perai Utara Perai Selatan

RM5,999 and below RM6,000-RM10,999 RM11,000 and above

Source: Household Income Survey 2016, Department of Statistics, Malaysia. 29 Penang Economic and Development Report 2017/2018

Figure 2.8 Average monthly household expenditure in Penang, 2016

1,400.0 1,232.0 1,200.0 1,000.0

800.0 667.8

RM 561.5 600.0 428.2 361.5 400.0 200.6 220.9 129.4 140.7 200.0 98.2 78.4 71.1 0.0 s s n n Health ansport , gas and Tr Educatio other fuel Communicatio , electricity Clothing and footwear Restaurants and hotel rnishing, household equipment Recreation services and culture Alcoholic beverages and tobacco Fu Housing, water Miscellaneous goods and services Food and non-alcoholic beverages and routine household maintenance

Source: Household Expenditure Survey 2016, Department of Statistics, Malaysia.

Box 2.1 Regional development disparities dictate household expenditure by Ong Wooi Leng, Socioeconomics and Statistics Programme

Regional disparities in socio-economic development to a great extent determine the patterns of household expenditure in Malaysia. This can be seen in the variations in the prices of goods and services sold in a specific region, as well as in household earnings. For example, household expenditure is often lower in a region that has agricultural and fishery activities as its primary economic focus, compared to a region reliant on the manufacturing and services sectors.

On average spending, the central region of Peninsular Malaysia – the most developed states – has the largest household expenditure in the country, with the exception of Negeri Sembilan. Putrajaya tops in average expenditure with a household spending of as high as RM6,971 per month, followed by Kuala Lumpur (RM6,214) and Selangor (RM5,183) in 2016.

Households in the southern region account for the second-largest expenditure, with Malaccan (RM4,274) households spending RM225 more every month compared to Johor (RM4,148).

Meanwhile, with the exception of Labuan, households in East Malaysia (Sabah: RM2,595; Sarawak: RM3,118), Kelantan (RM2,875), and Perlis (RM3,085) – the least developed states and are largely agricultural- and fishery-driven – spent the least. This shows that households residing in a region with high-intensity development spent more of their monies than households from low-intensity development regions.

In terms of component expenditure, Malaysian households spend about a quarter of their entire expenditure on housing, water, electricity, gas, and other fuels. This is often the key element in household consumption, and, unsurprisingly, in states with high-intensity development, namely Kuala Lumpur, Putrajaya, Penang, Selangor, and Johor, that share is generally higher.

States with a lower development intensity on the East Coast, for example, spend more than one-fifth of total household expenditure on food and non-alcoholic beverages. Penang Economic and Development Report 2017/2018 30

It is of concern that the increase in average household income in most states did not keep up with the rise in household expenditure. Only households in Selangor, Kelantan, Perak, Pahang, Kedah, and Johor experienced a rise in income that was greater than the rise in expenditure (Figure 2.9).

Figure 2.9 Compounded annual growth rate of mean household expenditure and income by states

8,000 12.0 Household expenditure 2014 7,000 10.0 6,000 5,000 8.0 Household expenditure 2016 % RM 4,000 6.0 3,000 4.0 2,000 Household expenditure growth 1,000 2.0 rate (RHS) 0 0.0 k a n Household income growth rate ual

edah (RHS) Perlis Pera Johor lantan K Sabah . K Penang Pahang P Malacca . Labuan Sarawak Ke Selangor rengganu P . Putrajaya W. Te W. P W. Negeri Sembila

Source: Household Expenditure Survey 2014 and 2016, Department of Statistics, Malaysia.

What is vital to note is that household expenditure grew proportionately more in some of the country’s least developed states. Terengganu and Perlis registered increases in household expenditure of 10.4% and 9% per year, respectively, from 2014–16, just trailing behind Putrajaya (10.7%).

In addition, households from different income groups value consumption items in their own way, heavily depending on individual need. While households from the top 20% (T20) spend half their household income on health, transport, communications, and education expenses, the bottom 40% (B40) households use an equal proportion of their income on food and housing.

2.5 Income distribution and poverty largest land area at 241 km2, Seberang Perai Selatan has the lowest population share among all districts, In 2017, Penang’s total population stood at 1.62 and it has the lowest density of population, with 785 2 million persons, which made up 5.5% of Malaysia’s persons per km . total population, the same proportion as it was in 2016. The median monthly income for Penang’s T20 households stood at RM12,268, which was below As depicted in Figure 2.10, the population distribution the nationwide median of RM13,148. In contrast, the in the state remained the same over the last two state’s middle 40% (M40) households recorded a years, with Timur Laut maintaining its position as higher median monthly income of RM6,382 against the most populated administrative district. Although the national median of RM6,275, while the median Timur Laut is the smallest administrative district monthly income for B40 households was RM3,286 – with a land area of 119 km2, it comprises 32.5% of slightly higher than the national median of RM3,000. the state’s population, with a population density of 4,765 persons per km2. This is followed by Seberang Penang’s T20 median monthly income ranked below Perai Tengah, which account for 23.3% of the total Selangor, Johor, and the three federal territories. population and has a population density of 1,769 However, for M40 and B40 households, Malacca’s persons per km2. Despite sustaining the second median monthly income was higher Penang’s. 31 Penang Economic and Development Report 2017/2018

Figure 2.10 Population distribution by administrative district, Penang, 2016–17

2017 23.4% 19.7% 11.1% 32.5% 13.2% Seberang Perai Tengah Seberang Perai Utara Seberang Perai Selatan Timur Laut 2016 23.3% 19.7% 11.1% 32.6% 13.2% Barat Daya

0% 20% 40% 60% 80% 100%

Source: Household Income and Basic Amenities Survey Report for Penang, 2016, Department of Statistics Malaysia.

Table 2.5 Median monthly household gross income of household groups by income and state, Malaysia, 2016 Median monthly income (RM) State Bottom 40% Middle 40% Top 20% Malaysia 3,000 6,275 13,148 Johor 3,420 6,554 12,304 Kedah 2,154 4,412 9,602 Kelantan 1,869 3,667 8,427 Malacca 3,458 6,572 12,077 Negeri Sembilan 2,658 5,409 10,857 Pahang 2,722 4,648 9,049 Penang 3,286 6,382 12,268 Perak 2,366 4,678 9,540 Perlis 2,572 4,751 9,017 Selangor 4,395 8,585 17,410 Terengganu 3,135 5,443 10,692 Sabah 2,169 4,843 10,886 Sarawak 2,275 4,986 10,688 W.P. Kuala Lumpur 5,344 10,564 20,201 W.P. Labuan 3,654 7,217 15,238 W.P. Putrajaya 5,960 9,492 21,994

Source: Household Income and Basic Amenities Survey Report for Malaysia, 2016, Department of Statistics Malaysia.

Based on the latest data available5, the highest proportion of the former being significantly higher. percentage of Penang households for 2016 (36.9%) were concentrated in Timur Laut. Timur Laut also Meanwhile, Seberang Perai Utara saw a decrease held the highest income share across all districts of 0.7% in households while Seberang Perai Selatan for both 2014 and 2016. Despite a decrease of saw an increase of 0.5% in households. Seberang 0.7% in percentage of households, Timur Laut Perai Tengah generally maintained its percentage of saw an income share increase of 0.8%, going up households, seeing only a minimal increase of 0.1%. from 41.5% to 42.3% for 2016 (Figure 2.11). The All three districts experienced a decrease in overall neighbouring administrative district of Barat Daya, income share from 2014 to 2016, with the biggest however, recorded a 0.8% increase in its percentage decrease of 1.2% found in Seberang Perai Utara. of households, and a 0.7% increase in income Nevertheless, Seberang Perai Tengah maintained share. Timur Laut and Barat Daya were the only the second-highest income share in the state two adminstrative districts with an income share (20.4%). The district with the lowest income share higher than the percentage of households, with the is Seberang Perai Selatan (8.7%).

5 Household income and expenditure data is collected biennially by the Department of Statistics, with 2016 being the latest year of reference. Therefore, the analysis of Penang’s income distribution and poverty will use data from 2016 as its reference point. Penang Economic and Development Report 2017/2018 32

Figure 2.11 Percentage of households and income share by administrative district, Penang, 2014 and 2016

45% 41.5% 42.3% 40%

35%

30%

25% 20.5% 20.4%

20% 15.6% 14.4% 13.4% 14.1% 15% 9.0% 8.7%

Percentage of households 10%

5% 22.5% 22.6% 17.4% 16.7% 10.0% 10.5% 37.6% 36.9% 12.4% 13.2% 0% 2014 2016 2014 2016 2014 2016 2014 2016 2014 2016

Seberang Perai Seberang Perai Seberang Perai Timur Laut Barat Daya Tengah Utara Selatan

Adminstrative district Percentage of households Income share

Source: Household Income and Basic Amenities Survey Report for Penang, 2016, Department of Statistics Malaysia.

Timur Laut retained the highest household of income groups varied considerably (Figure percentage in each income group, in accordance 2.13). In 2016, Timur Laut and Barat Daya held to its population and household share (Figure a much higher percentage of T20 households at 2.12). In 2016, about 46% of T20 households were 25.9% and 23.4%, respectively. In addition, the T20 in Timur Laut, which was an increase of 3.7% households held 52% of total income share in Timur from 2014. Seberang Perai Tengah followed, but Laut, and 45.7% in Barat Daya. The proportion of at a significantly lower percentage of 19.6% – an T20 households in the remaining districts were all increase of 1.4% from 2014. below 20%, with Seberang Perai Tengah having the highest percentage at 18.6%. However, the income The trend of Timur Laut and Seberang Perai Tengah share of the T20 households in all districts exceeded maintaining their top-two ranking in total share of 30%, with the lowest share of 31% found in Seberang households was observed across all income groups. Perai Selatan, whose share of T20 households stood In 2016, both districts saw decreases in their share at 13%. of M40 households in 2016. While Timur Laut’s share of B40 households was reduced by 2.6%, Seberang With a corresponding percentage of 36.7% and Perai Tengah recorded an increase of 1.7%. 36.0%, Barat Daya and Seberang Perai Tengah again had the highest percentages of M40 households In contrast, Seberang Perai Selatan had the lowest within its districts, but the rest were not significantly share in T20 and M40 households, while seeing a far behind. Seberang Perai Utara had the lowest 1.4% drop in the former and a 0.4% rise in the latter percentage at 29.6%. Surprisingly, the income share in two years. The district with the lowest share of M40 was the lowest in Timur Laut, with 30.1% of B40 households would be Barat Daya, whose of total income share, accounting for 34.6% of its percentage of 10.8% held steady from 2014 to 2016. total households. At 41.2%, the highest income Barat Daya also experienced a decrease of 1.3% share sustained by M40 households was found in in T20 households, but saw an increase of 2.9% in Seberang Perai Selatan. M40 households. Seberang Perai Utara was the only district that recorded a decline in all three household B40 households made up the majority of income groups over the two-year period. households in each administrative district. The highest percentage of B40 households was found in Within each administrative district, the proportion Seberang Perai Utara, accounting for more than half 33 Penang Economic and Development Report 2017/2018

Figure 2.12 Percentage of households by household income group and administrative district, Penang, 2014 and 2016

100% 12.0% 10.9% 10.8% 90% 16.1% 14.8% 14.9% 80% 31.9% 70% 34.5% 38.6% 37.5% 60% 42.2% 45.9%

50% 11.2% 12.7% 9.9% 40% 10.3% 8.0% 6.6% 20.4% 20.1% 30% 15.4% 15.1% 15.4% 13.2% Percentage of households 20% 24.1% 24.7% 10% 18.2% 19.6% 22.2% 23.0% 0% 2014 2016 2014 2016 2014 2016 Top 20% Middle 40% Bottom 40%

Seberang Perai Tengah Seberang Perai Utara Seberang Perai Selatan Timur Laut Barat Daya

Note: Income thresholds are as follows: T20: ≥ RM9,200, M40: RM4,640–9,199, B40:

the households at 53.6%, and the lowest percentage It is apparent that there were huge discrepancies was found in Timur Laut, at 39.8%. Despite being the in income distribution across different household majority group, the income share of B40 households groups and administrative districts. The was the lowest, falling below 30% of the state’s discrepancies were especially significant in Timur total income share. Seberang Perai Utara’s B40 Laut and Barat Daya. However, income distribution households had the highest income share at 29.7%. appeared to be more levelled in Seberang Perai – B40 households in Timur Laut had only 17.9% of bearing in mind that their share of T20 households total income share, the lowest across all districts. was also much lower than the share of Timur Laut and Barat Daya.

Figure 2.13 Percentage of households and income share within administrative districts, Penang, 2016

100%

90%

80% 39.8% 39.9% 47.8% 53.6% 51.1% 70%

60% 34.6% 36.7% 50% 34.0% 36.0% 40% 29.6%

30%

Percentage of households 20% 25.9% 23.4% 10% 18.3% 16.8% 13.0% 0% Seberang Perai Seberang Perai Seberang Perai Timur Laut Barat Daya Tengah Utara Selatan % of households: Top 20% % of households: Middle 40% % of households: Bottom 40% Income share: Top 20% Income share: Middle 40% Income share: Bottom 40%

Note: Income thresholds are as follows: T20: ≥ RM9,000, M40: RM 5,000–8,999, B40:

6 The income thresholds for the respective household groups are as calculated and published by the Department of Statistics Malaysia. 7 The income thresholds for household groups are readjusted in accordance to the categorisation of monthly gross income class of household in comes, as published by the Department of Statistics Malaysia. Penang Economic and Development Report 2017/2018 34

Taking a state-wide perspective of income in Timur Laut as well. Likewise, the district’s B40 distribution across different household groups households also had the biggest share of income in and administrative districts in accordance to comparison to all B40 households in other districts, share of households, it was found that 22% of the bearing in mind that its share of B40 households was state’s income share belonged to Timur Laut’s T20 the highest. In fact, the income share of Timur Laut’s households, which accounted for only 9.5% of total B40 households outweighed that of every other households (Figure 2.14). All T20 households within income group in other districts, with the exception of each administrative district had income shares that M40 and T20 households in Seberang Perai Tengah. was higher than the respective share of households, with the reverse observed for B40 households. The disproportionate share of income to population M40 households generally had an income share found in Timur Laut’s T20 households can be proportionate to the corresponding household share. explained by the fact that the biggest share of households (8%) in the group earned a monthly Within the M40 households, the group with the household income of more than RM15,000, second-highest income share in the state was found accounting for 11.5% of the district’s total income share.

Figure 2.14 Percentage of households and income share by administrative districts, Penang, 2016

Note: Income thresholds are as follows: T20: ≥ RM9,000, M40: 5,000–8,999, B40:

Table 2.6 Gini coefficient of monthly household gross income, Penang 2014 and 2016 Gini coefficient 2014 2016 Urban 0.364 0.356 Rural 0.314 0.324

Seberang Perai Tengah 0.317 0.330 Seberang Perai Utara 0.345 0.338 Seberang Perai Selatan 0.342 0.339 Timur Laut 0.395 0.377 Barat Daya 0.359 0.327 Penang 0.364 0.356

Source: Household Income and Basic Amenities Survey Report for Penang, 2016, Department of Statistics Malaysia.

8 The income thresholds for household groups are readjusted in accordance to the categorisation of monthly gross income class of household in comes, as published by the Department of Statistics Malaysia. 35 Penang Economic and Development Report 2017/2018

Penang’s Gini coefficient was the sixth-lowest the district with the highest Gini coefficient (0.395), in Malaysia for 2016, and it was also lower than which could be explained by the large discrepancies the national Gini coefficient of 0.399. As the two in household incomes between B40 households and states with a higher M40 and B40 median monthly T20 households. Barat Daya had the lowest Gini household income, Johor and Malacca’s Gini coefficient at 0.326. coefficient was lower than Penang’s. However, the Gini coefficient of these two states actually With the establishment of Agenda Ekonomi increased from 2014 to 2016. Saksama (AES) or Equitable Economic Agenda, hardcore poverty has been abolished in Penang. The Overall, Penang’s Gini coefficient decreased from incidence of poverty declined from 2014 to 2016, 0.364 in 2014 to 0.356 in 2016, and the same with the state’s incidence of poverty standing at 0.1 situation was observed across all administrative for 2016. All districts except Seberang Perai Selatan districts, with the exception of Seberang Perai recorded a decrease in their respective incidence of Tengah. This signifies that the income inequality poverty to zero, with Seberang Perai Utara recording gap had decreased somewhat across the majority the biggest decrease. However, despite the increase of districts. However, looking at the urban/rural in the number of AES recipients in Seberang Perai divide, the Gini coefficient had a slight increase in Selatan, its incidence of poverty increased from 0 to the rural area from 0.314 to 0.324. Timur Laut was 0.1.

Table 2.7 Incidence of poverty by administrative district, Penang, 2014 and 2016 Incidence of poverty Administrative District 2014 2016 Seberang Perai Tengah 0.2 0.0 Seberang Perai Utara 0.6 0.0 Seberang Perai Selatan 0.0 0.1 Timur Laut 0.3 0.0 Barat Daya 0.1 0.0 Penang 0.3 0.1

Source: Household Income and Basic Amenities Survey Report for Penang, 2016, Department of Statistics Malaysia.

Box 2.2 Agenda Ekonomi Saksama (AES) by Yeong Pey Jung, Socioeconomics and Statistics Programme

In 2009, the Penang state government established the state’s poverty alleviation programme, AES, which has the core objective of abolishing hardcore poverty and reducing income equality in the state. Initially named Bantuan UPEN, the AES acts as a cash transfer programme, where households earning below the state-defined poverty threshold will be given monthly financial aid in order to lift them above the poverty line. Presently, families earning a monthly household income of RM790 and below will qualify for AES assistance.

In its inception, the AES was a non-conditional cash transfer programme, where the only requirement was a household income of less than the minimum threshold. However, it has been redefined as a conditional cash transfer programme since 2015, where recipients are expected to submit vaccination records, school attendance, and academic records of their children (if any). Elderly recipients are also required to submit their health records in a bid to ensure that they are receiving the necessary medical attention. The change from unconditional to conditional was done based on the need to monitor the economic and social impact of the AES. The data collected from AES recipients will allow analysis on the profile of Penang’s poor, and encourage the development of sustainable programmes to help elevate vulnerable groups and bring them out of the cycle of poverty. Penang Economic and Development Report 2017/2018 36

Table 2.8 Amount received by number of recipients in the AES programme by administrative district, 2006–17

2016 2017 District Number of Number of Amount (RM) Amount (RM) recipients recipients Seberang Perai Tengah 214 614,810 267 900,872 Seberang Perai Utara 695 2,159,897 661 2,232,647 Seberang Perai Selatan 158 495,780 181 662,315 Timur Laut 140 253,990 178 639,565 Barat Daya 168 560,116 191 749,641 Penang 1,411 4,084,593 1,478 5,185,040

Source: State Economic Planning Division, Penang, 2018.

The AES had spent a total of RM29.2 million since its inception in 2009, and has helped to lift more than a thousand households out of poverty. In 2017, the district with the highest number of recipients was Seberang Perai Utara, with a total of 661 households receiving aid. This is expected, as Seberang Perai Utara had the highest of proportion of B40 households within the district. With the lowest proportion of B40 households at 39.8%, Timur Laut had the least number of households needing financial aid, with 178 households registered for the programme for 2017. Seberang Perai Utara received the largest amount of aid, consistent with its number of recipients, while Timur Laut had the least amount of aid dispersed with the fewest recipients.

It should be noted that all districts, with the exception of Seberang Perai Utara, recorded an increase in their respective number of AES recipient households in 2017. The most significant increase was found in Seberang Perai Tengah, with an increase of 53 households. Seberang Perai Utara marked decline of 34 households from the previous year. However, the amount of aid had grown from 2016, as with every other district.

2.6 The labour market by less than 1% from 827,400 people in 2016 to 822,200 in 2017. The services sector made up the The current state of the labour market largest proportion of employment, accounting for about 55%, followed by the manufacturing (36.4%) Penang’s labour market remained stable, with and construction (5.9%) sectors. While the size minor frictional unemployment9. Although both of employment in other economic sectors was numbers of labour force and employed persons has declining, the manufacturing sector grew by 9.8% in declined, the state maintained its unemployment 2017 (Table 2.9). rate far below the national unemployment rate of 3.4%. Youth unemployment remains prevalent but The proportion of workforce with tertiary education Penang still performs far better than the national softened by 0.2% to 32% in 2017 while those average. The job market is highly concentrated in employed in high-skill positions rose by 1.1% to the manufacturing sector. 33.4% in 2017. Nevertheless, Penang still has one of the largest share of highly educated workforce in the The labour force participation rate declined to 67.5% country with more non-tertiary graduates accepting in 2017, 1.5 percentage points lower than in 2016. high-skill positions (See Box 2.3). Total number of employed persons also dropped

9 Frictional unemployment is a short-term effect on the employment market where job seekers leave their old jobs voluntarily while waiting to resume work in new jobs. 37 Penang Economic and Development Report 2017/2018

Table 2.9 Employment by industry in Penang, 2016 and 2017 (‘000) % share Industry 2014 2016 2014 2016 Agriculture, forestry, and fishing 10.5 10.2 1.3 1.2 Mining and quarrying 0.1 0.4 0.0 0.0 Manufacturing 272.5 299.2 32.9 36.4 Electricity, gas, steam, and air conditioning supply 5.3 1.9 0.6 0.2 Water supply; sewerage, waste management, and remediation activities 3.3 6.4 0.4 0.8 Construction 61.3 48.4 7.4 5.9 Services 465.8 449.6 56.3 54.7 Wholesale and retail trade; repair of motor vehicles and motorcycles 127.6 135 15.4 16.4 Transportation and storage 42.6 40.5 5.1 4.9 Accommodation and food and beverage service activities 79.2 69.1 9.6 8.4 Information and communication 7.8 7.4 0.9 0.9 Financial and insurance/takaful activities 19.6 15.5 2.4 1.9 Real estate activities 7.0 5.6 0.8 0.7 Professional, scientific, and technical activities 19.6 21.4 2.4 2.6 Administrative and support service activities 32.8 29.2 4.0 3.6 Public administration and defence; compulsory social security 29.1 32.4 3.5 3.9 Education 47.2 40.3 5.7 4.9 Human health and social work activities 33.6 30.9 4.1 3.8 Arts, entertainment and recreation 5.5 5.5 0.7 0.7 Other service activities 14.2 16.8 1.7 2.0 Activities of households as employers 8.4 6.1 1.0 0.7 Total 827.4 822.2 100.0 100.0

Source: Labour Force Survey, Department of Statistics, Malaysia.

In 2017, the number of unemployed persons Gender disparity in the workforce still remains plummeted by 4.4%, leading to an unemployment evident. In 2017, Penang’s male and female labour rate of 2.1%. Penang recorded the third-lowest rate force participation rates softened to 79.2% and of unemployment in the country after Putrajaya 55.7%, respectively. However, the state’s female (1.8%) and Malacca (0.9%). However, among the top workforce residing in urban areas had a bigger developed states, Penang was ranked the lowest in representation in Malaysia than males, where the workforce that were not employed (Figure 2.15). female workforce contributed 7.1% has compared to 6.8% for male workforce in urban areas. The unemployment situation is largely attributed to an increased number of youth unemployment More women were employed in professional and and a bigger number of tertiary educated workforce clerical support positions compared to men. As can that are unemployed. Penang’s rate of youth be seen in Table 2.10, most men worked as plant unemployment increased from 5.5% in 2016 to and machine operators and assemblers (20.1%), 6.9% in 2017, while the unemployed workforce with followed by service and sales workers (18%) and tertiary education rose from 2.6% in 2016 to 2.8% in technicians and associate professionals (16.3%). 2017. Nevertheless, these rates are considered low Meanwhile, the majority of women were employed as compared to the national average of 10.8% for as service and sales workers (22.9%), followed by youth unemployment and 4.2% for labour force with plant and machine operators and assemblers (20%) tertiary education11 last year. and professionals (16.8%).

10 Youth unemployment refers to youth labour force aged between 15 and 24 who are available to work but are not employed. 11 According to the 2016’s Graduate Tracer Study by Ministry of Higher Education, over half of unemployed graduates were from arts and social sciences programmes. Penang Economic and Development Report 2017/2018 38

Figure 2.15 Unemployment rate by major developed states in Malaysia, 2008–17

4.0% e 3.5% 3.0% 2.5% 2.0% 1.5% Unemployment rat 1.0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Penang Johor Kuala Lumpur Selangor Malaysia

Source: Derived from the Labour Force Survey published by Department of Statistics, Malaysia.

Table 2.10 Employed persons by main occupational groups and gender in Penang, 2017 (‘000) % share Main occupational groups Male Female Male Female Managers 36.1 10.5 7.4 3.1 Professionals 54.0 56.3 11.1 16.8 Technicians and associate professionals 79.5 38.0 16.3 11.3 Clerical support workers 18.4 55.5 3.8 16.5 Service and sales workers 87.5 76.9 18.0 22.9 Skilled agricultural, forestry, livestock, and fishery workers 8.5 0.2 1.7 0.1 Craft and related trades workers 64.1 12.4 13.2 3.7 Plant and machine operators and assemblers 97.8 67.1 20.1 20.0 Elementary occupations 40.4 19.1 8.3 5.7 Total 486.4 335.9 100.0 100.0

Source: Labour Force Survey, Department of Statistics Malaysia.

Women were highly employed in human health their employment in manufacturing industries, and social work activities; education, financial, and men outnumbered the number of women employed insurance activities; and professional, scientific, in manufacturing industries, construction, and and technical activities. While both men and wholesale and retail trade. women accounted for the largest proportion of

Box 2.3 More non-tertiary educated workforce working in high-skill jobs by Ong Wooi Leng, Socioeconomics and Statistics Programme

As a primary source of labour supply, Malaysia’s public universities produced an average of 116,764 graduates per year in the past decade from 2008–17, with an average annual growth rate of 3.1%. Social sciences, business, and law continued to have the largest number of graduates produced by public universities, or about one-third of total graduates. This was followed by engineering, manufacturing, and construction (22.3%) and science, mathematics, and computer (16.8%).

An increase in the production of tertiary-educated graduates signifies an increase in tertiary-educated labour force. Penang’s share of labour force with tertiary education has increased by fourfold from 8.7% in 1990 to 32.3% in 2017, with a substantial rise after 2000. The state’s labour force was the fifth-largest labour force with tertiary education in the country, constituting the third largest share of labour force with tertiary education in the country. 39 Penang Economic and Development Report 2017/2018

While labour with no formal and primary education dropped significantly, secondary-educated labour remained as the largest proportion of the workforce in Penang and Malaysia.

The employment market is also progressing towards university graduate hires. The aggregate supply of tertiary-educated labour has to keep pace with the increase in demand for highly skilled labour. However, this gap has gradually been closed, indicating an oversupply of tertiary-educated labour.

As can be seen in Figure 2.16, before 2014, some high-skilled occupations did not appear to employ all tertiary-educated labour. Workers with secondary education were also qualified to work in high skilled positions. Since 2014, the supply of labour with tertiary education exceeded the number of those hired in high skilled positions. This means that not all labour with tertiary education worked in high-skilled occupations. In fact, an increasing share of tertiary-educated hires has not been absorbed into high- skilled jobs, though the number of employed labour with tertiary education has doubled.

Figure 2.16 Tertiary educated and high-skill employment in Penang, 2010–17

300,000

250,000

200,000

150,000 2010 2011 2012 2013 2014 2015 2016 2017 Number of employed persons

Persons tertiary educated in the labour force

Employed persons tertiary educated

Employed persons in high skilled occupations

Source: Authors’ calculations based on Labour Force Survey, Department of Statistics, Malaysia.

Job market third of these vacancies were related to product development and manufacturing processes, with Employee recruitment continued to accelerate due high demand for R&D, product, and design engineers. to positive business performances and private investment. Based on the latest data from the Ministry Junior positions, on the other hand, are largely of Human Resources, JobsMalaysia reported that required in the precision engineering and automation the number of job vacancies proliferated by 68%, industry, with specific hard skills in basic machine with the manufacturing sector recording the highest design, PLC (programmable logic controllers) number of vacancies in 2017. programming, and CNC (computer numerical control) machining. It takes an average of about two According to 2017 Penang Skilled Workforce Study months to search for suitable candidates. Skills in by the Penang Institute, JobStreet’s job vacancy demand include industry- and job-specific skills, as analysis shows that a majority of job advertisements well as achievement skills12, and relationship and searched for experienced workers to fill senior services skills13. According to job advertisements, executive and above positions. Meanwhile, high- soft skills are particularly in demand at large demand vacancies require five or more years of work corporations, and also when the position levels are experience. High-tech manufacturing companies higher. For example, positions for senior managers topped in staff recruitment need, accounting for would require high proficiency in achievement skills over half of total vacancies in Penang. Nearly one- than managers and senior executives.

12 Achievement skills include problem-solving skills, being proactive, result-oriented, and self-motivated. 13 Relationship and service skills comprise communication skills, interpersonal skills, team-building spirit, being a team player, and customer-oriented. Penang Economic and Development Report 2017/2018 40

Coupled with the strong expansion in approved Worker retrenchment manufacturing investment, the number of planned employment opportunities increased by a quarter Employee retrenchment has significantly improved. in 2017 from the total number of jobs created in The number of retrenched workers decreased to 2016. E&E products continues to make up the about 1,000 persons in 2017, a significant decline largest proportion of employment to be generated of nearly 74% after retrenchment levels peaked in the economy, representing nearly 40%, followed a year earlier at 4,045 persons (Figure 2.17). The by scientific and measuring equipment (16.1%) and manufacturing sector accounted for the most textile products (10.2%). retrenchment activities at 74%, followed by the services sector (36%). Labour recruitment This shows that some reorientation of business Based on the same study by the Penang Institute, operation strategies has occurred, along with software design positions take the longest to fill. improved business structures, especially among Network engineers and software development MNCs. According to the Penang Labour Department, engineers or developers may take up to six months the reasons for retrenchment include reducing to recruit, with high demand for SAP (systems the cost of production through automation in applications and products in data processing) the manufacturing process, outsourcing part of consultants and Java programmers in IT and global operational processes for to save cost. business services (GBS) industries. Some of the skills required are somewhat niche and specialised, Likewise, the number of workers participating in the hence the longer period needed to fill these positions. Voluntary Separation Scheme (VSS) significantly declined by about 83% to 146 persons in 2017. In contrast, recruitment difficulties are less prevalent Despite the fact that manufacturing industries in human resource positions. These vacancies take contributed over 60% of the total VSS workers, the least amount of time to fill; they can be filled employers implemented fewer VSS programmes, within a month. The majority of the openings are for and fewer employees were needed to be cut. junior and senior executive positions. Salaries and wages Investment in skills training to reduce skill deficiencies within the organisation would be key Penang recorded the highest growth in median to retaining employees, but it also opens up job monthly salaries and wages among the most opportunities for employees. The cost of attrition developed states in Malaysia. Its median monthly is non-bearable by some companies as it allows salaries and wages increased by 8% to RM2,160 employees to become more mobile in the job market. in 2017 (2016: 5.3%; RM2,000) compared to Kuala Lumpur (6.0%), Selangor (3.2%), and Johor (2.3%).

Figure 2.17 Number of retrenched workers in Penang, 2008–17

7,000 5,776 6,000 Growth rate: -73.6% 5,000 4,045 4,000 3,565

workers 3,000 1,781 2,000 1,266 Number of retrenched 1,069 768 805 859 1,000 383

0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Source: Penang Labour Department. 41 Penang Economic and Development Report 2017/2018

Internal migration foreign workers, accounting for 7.4% of the entire foreign workforce in the country. One-third of these A positive net migration was again recorded in workers are employed in the manufacturing sector, Penang for 2015–16. Net migration increased by followed by construction (12.9%), services (11.7%), nearly 43% to 12,000 persons, marking the second- and domestic help (5.7%). Male foreign workers largest number of in-migrants exceeding the dominate in all sectors except domestic help. number of out-migrants after Selangor (Figure 2.18). Meanwhile, Kuala Lumpur had the most number of Given the insufficient information gathered as of persons moving out of the territory. Penang also had this writing, it is difficult to analyse the nationality of the highest positive migration effectiveness ratio foreign workers in Penang. However, at the national at 58.4%, indicating that for every 100 inter-state level, the majority of foreign workers are from migrants, the number of people migrating in and out Indonesia, Nepal, and Bangladesh as of February increased by 58 persons. In contrast, the population 2018, or about 40%, 22%, and 15% of the total in Kuala Lumpur shrank by 93 people for every 100 foreign workers, respectively. Most Bangladeshi and inter-state migrants. Nepalese workers are employed in the manufacturing sector, while Indonesian workers are employed in In 2015–16, about half of migrants aged 15–64 who the farming industry. moved to Penang had tertiary education; about one- fourth of in-migrants worked in sales and services While the number of foreign workers is high, the areas, followed by plant and machine operators number of approved temporary work passes has and professional occupations. Two-thirds were reduced significantly since 2014. The number employed in the services sector. of temporary work visit passes approved by the Penang Immigration Department halved in 2015 Foreign workers from 164,885 persons in 2014, and further declined to 23,735 in 2016, before increasing by 24.5% to As of February 2018, Penang received about 130,000 29,550 in 2017.

Figure 2.18 Net migration by state in Malaysia, 2014–15 and 2015–16 7

30.0 4 22. 19. 0 20.0 7 12. 4 10. 8 2 2 8. 6 4 7 3 1 5. 5. 5. 6 4. 4. 10.0 0 3. 3. 3. 1. 1. 0.0 -0.5 -0.6 -10.0 -1.0 -1.6 -1.9 -2.3 -3.2 -3.4 ('000) -6.2

-20.0 -2.3 -9.8

-30.0 3

-40.0 -32. 7

-50.0 -37. k n edah mpur Perlis Pera Johor lantan K Sabah Penang Pahang Lu Malacca Sarawak Ke Selangor rengganu Te uala K P. Negeri Sembila W. 2014–15 2015–16

Source: Migration Survey Report 2016, Department of Statistics, Malaysia. Penang Economic and Development Report 2017/2018 42

2.7 Prospects for 2018 well received by groups such as housewives, full- time and part-time workers, and unemployed youth. Penang’s economic performance and GDP growth Household expenditure is projected to modestly is expected to continue growing and improving increase due to the abolishment of the GST in the in 2018, in the light of increasing foreign direct second half of 2018. The purchasing power of investments in the state’s manufacturing sector. households may increase as consumers can now The services sector is also expected to contribute spend more on food and travel. to economic growth due to its steady expansion and the rapid development of the state’s SSO activities. In 2018, the labour market condition is expected to Advancements in the global and domestic economy remain stable with low retrenchment activity and will have a positive impact on Penang’s economy unemployment rate. The job market remains resilient due to the state’s position as an export hub. due to the expansion of manufacturing operations in Batu Kawan and the upcoming opening of the IKEA The significant increases in Penang’s total volume shopping complex. Positive business performance of external trade in 2017 is expected to continue and high increments in approved private investments, in 2018. Machinery and transport equipment particularly in the manufacturing sector, will lead to accounted for the largest export and import increasing demand for recruitment and employment. commodity in the first two months of 2018, and this However, there is higher demand for high-skilled is expected to remain going forward. Additionally, as and experienced workers, predominantly within a hub for the E&E industry, Penang’s external trade the high-tech manufacturing industries, relating position and trade balance is projected to remain to product research and development as well as strong, buoyed by the consistent growth in the world manufacturing and engineering processes. Fresh semiconductor market in 2018. graduates and non-tertiary educated workers may still struggle to gain steady employment. Therefore, The abolishment of the GST and reinstatement of the state’s and the industry’s investment in skills the SST is predicted to have a positive effect on training is vital in overcoming skills deficiencies and prices, in particular on food and beverage, retail, and raising the employability of graduates. property prices. The lowering of input costs will lead to lower prices for consumers. In terms of income distribution, Timur Laut is expected to continue retaining the highest income Household income will continue to improve, owing share in the state, as well as having the highest to the booming digital economy. On top of annual proportion of T20 households as it is the capital of increments in wages and salaries, income generated the state and a highly populated urban area. With from digital activities, including ride-sharing and the projected growth of Penang’s economy, the Gini e-commerce, are likely to increase the household coefficient is forecast to gradually decrease, thus income of Penangites in 2018. Part-time income bridging the income gap and reducing poverty. earned from being ride-sharing drivers are relatively